Question 1. You invest in an investment that pays 22 equal annual payments of $70 at the beginning of each of the next 22 years. What is the present value of this investment given a discount rate of 2% under annual compounding?
Question 2. What is the most that a rational investor would be willing to pay for an investment that pays $555 five years from today? This investor uses a discount rate of 5% and quarterly compounding for investments of this risk.
Question 3. If you pay $35 at the end of every month into an ordinary savings account that pays 4% interest, how much money will you have after 40 years?
Question 4. What is the future value of $1, one year from today, using an interest rate of 3% and quarterly compounding?
Question 5. What is the value of a share of common stock that just paid a dividend of $3 and has a growth rate of 7%. Your RRR is 10%.
Question 6. What is the value of a share of preferred stock with a face value of $45 that pays a dividend rate of 5%? Your RRR for this investment is 9%